We can get additional equity in next one to two months, says Utkarsh Small Finance Bank MD and CEO Govind Singh

he net-worth of the bank is around R300 crore, as at the end of March 2017, Govind Singh says.

The regulatory requirement is that it has to be done within three years of the net-worth reaching R500 crore, he says. (Representation image)

Having made the transition from a microfinance lender to a full-service bank on September 22, Utkarsh Small Finance Bank is now offering medium, small and micro enterprise (MSME) and housing loans, managing director and chief executive officer Govind Singh told Shritama Bose. The bank has seen its cost of funds fall nearly 100 basis points (bps) over the last six months and expects an equivalent drop in another six months, he added. Excerpts:

You launched as a full-service bank on September 22. What did this launch entail?

We have been a microfinance company. Microfinance loan was one of our products. Apart from that, we have loans for MSMEs and housing. These were our products as an NBFC (non-banking financial company). Over a period of time, we have launched our liability products, like savings (accounts), RD (recurring deposit), FD (fixed deposit) and insurance products. So we have all these products at launch. We’ll also have all the channels available. We’ll have internet banking, mobile banking, ATMs, call centres and so on. We’ll also offer payment options like NEFT (National Electronic Fund Transfer), IMPS and RTGS (Real Time Gross Settlement). All those functions will now be available.

Are you launching any digital products?

We used to have e-KYC (Know Your Customer) and tablet banking for our mcrofinance customers. Now we’ll also have it for our liability customers.

In how many states have you launched?

We were already present in 10 states. We have 351 existing microfinance branches, of which we are upgrading some to micro-banking. We are putting some brand new branches where we’ll have all products available. We have a few MSME branches also. In all, we have about 400 banking outlets. All products and services will be available at all these outlets.

By when do you expect to reap the benefit of a lower cost of funds?

We could get a benefit of about 90-100 basis points in the last six-seven months also and we are expecting the scheduled bank status sometime this month. In six months’ time, we expect another 100 basis points of reduction in the cost of funds.

What are your plans for capital-raising this year?

We can get some additional equity during the next one to two months’ time. The talks on that are now in advanced stage. The raise will be from existing shareholders only.

Do you have a timeline for listing?

The regulatory requirement is that it has to be done within three years of the net-worth reaching R500 crore. The net-worth of the bank is around R300 crore, as at the end of March 2017. So the listing may happen around four to four-and-a-half years from now.

In April, you had said that while collections had recovered in most geographies, you were still seeing some impact of demonetisation in areas like Vidarbha. Have repayments in those locations improved?

In some regions like Vidarbha, things have actually not moved in the last four-five months’ time. But, our core geographies, like Uttar Pradesh, have got back on their feet. There we are almost back to normal right now. Other geographies like Haryana and Delhi have also improved a lot. The only geography where there is still pressure, as far as we are concerned, is Vidarbha. Overall, there has been massive improvement.